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About BCC Research
•Founded in 1971, acquired by Eli Research in 2005
•Publishes forward-looking technical market research reports in 18 major technology markets
•Plastics, Chemicals, Advanced Materials, Semiconductors, Nanotechnology, Pharmaceuticals, Healthcare, Information Technology, others
•Custom Research
•Daily/monthly newsletters—Nanotechnology, EVs, Membrane/Separation Technology, Fuel Cells, RE, Alternative Fuels, Global Warming, Green Building
•Energy magazine (quarterly)

Other Plastics Research Reports
•Medical Plastics—Schlecter (November)
•Plastics in Electronic Components—Schlecter (Sept.)
•High-Performance Films—Smock (Sept.)
•Plastics Compounding—Schlecter (June)

Biodegradable Polymers Market Research Report
•Published in December 2005
•Included are polymers marketed as “fully biodegradable” (fully converted by microorganisms to CO2, H2O, and humus, or CO2, methane, and humus if anaerobic biodegradation)
•Included are chemical types of biodegradable polymers, properties, production, producers and applications
•Consumption data on global basis, detailed information for North American, Western European and Japanese products, technologies, markets and companies
•Realistic assessments of market size, growth rates, company involvement, other important factors affecting the market.

Analyst Mel Schlechter
•More than 30 years in the chemical/plastics industry
•Specializes in plastics market research
•BCC analyst for more than 10 years
•B.S. degree in chemistry, M.S. in organic chemistry, M.B.A. in marketing
•10+ years International Director of Chemical Reports for Frost & Sullivan
•10 years Sr. Market Research Analyst-Union Carbide

Methodology & Sources
•Extensive review of technical and market information
–Trade literature, published articles, technical & marketing presentations and papers, company literature
–Numerous interviews with key players at major companies and trade associations

Disclaimer
The information in this report is intended to be as reliable as possible at the time of publication and of a professional nature. This information does not constitute managerial, legal, or accounting advice; nor should it serve as a corporate policy guide, laboratory manual, or an endorsement of any product, as much of the information is of a speculative in nature. Neither the publishers nor the author assumes responsibility for any loss or damage that might result from reliance on the reported information or from its use.

Overview-The Bad News
•Biodegradable polymer market is more than 20 years old, but is still very early in its product lifecycle.
•Market is still beset with several major problems, the most important of which are high prices and lack of an infrastructure for effective composting
•The North American biodegradable polymer market has not progressed as rapidly as those in Europe and Japan.
•Major drivers for U.S. market are mandated legislation and prospective increases in landfill pricing—neither of which is foreseen within the next five years.
•Only a few major players are in the game, led by NatureWorks LLC in No. America, and Novamont and BASF in Europe.
•Companies have tended to exit market after not seeing suitable ROI.

Overview-The Good News
•There have been technology advances, lower pricing, new products, and markets for biodegradable polymers.
•Despite the problems, average annual growth rates are far in excess of GDP.
•Market is expected to be well over 200 million pounds by the end of the decade.

Biodegradable Polymers: Chemical Types
•Polyglycolic acid (PGA)
•Polylactic acid (PLA)
•Polycaprolactone (PCL)
•Polyhydroxybutyrate (PHB)
•Polyhydroxyvalerate (PHBV)
•Polyester-PLA
•Other polyesters
•Polyvinyl Alcohol (PVOH)

PLA: A Special Case
•PLA—polylactic acid—was originally targeted for non-biodegradable applications
•Capacity and production of PLA are much larger than other biodegradable polymers
•Bulk of PLA usage still is not as biodegradable polymer

Global Market by Application
(mil lbs)

Definitions of “Packaging” and “Other”
*Packaging: Includes loose-fill packaging, which constitutes about two-thirds of the total
**Other: Includes medical/hygiene products, agricultural, paper coatings, etc.

GLOBAL BIODEGRADABLE POLYMER MARKET BY APPLICATION
(MILLION LBS)
IMAGE HERE - SLIDE 16

Biodegradable Polymer Producers
•Production and shipment information often or usually is uncertain, making exact data difficult to obtain
•BCC Research estimates approx. 60% of global production in Europe
•30% in U.S.
•10% in Japan

North American Producers
NatureWorks
DuPont
Dow

European Producers
BASF
Eastman
Novamont S.p.A.
Solvay

Japanese Producers
Japan Corn Starch
Kaneka
Mitsubishi (Chemical, Gas Chemical, Plastics)
Mitsui (Chemical, Plastics)
Nippon Shokuhin Kako
Showa High Polymer
Toyobo
Unitika

Demand/Consumption
Past market estimates have been far too optimistic, with projected growth over 20% annually. Analysts assumed production & public acceptance would increase and prices would fall to competitive level with oil-based polymers—these things didn’t happen, even in Europe. Difficulties in forecasting market are compounded by fact that companies enter and exit frequently, with lack of acceptable ROI leading the list of reasons. Companies are reluctant to divulge ANY market information and there are only a handful of major players, making market analysis still more difficult.

Global Market by Material
(mil lbs)

Index of Global Market by Material
1. Expandable polystyrene replacement products
2. Contains 40% to 70% polyester blended with starches with BASF, Dow and Solvay supplying organic products
3. Product exclusively from Natureworks LLC
4. Merchant product including Ecoflex™, Biomax™ (mostly in Japan), additional
5. Japanese product, PHB and related products miscellaneous materials

Global Market by Material
(mil lbs)
IMAGE HERE - SLIDE 25

Summary of Regional Markets
Forecasting by geographic region is, logically, even more difficult than overall market forecast, but some general conclusions can be drawn:
–Europe is largest consumer and will be for at least end of decade .

North American Market
Biodegradable polymers will probably not become a commodity material for some time, unless PLA meets with more acceptance. One key to growth is for biodegradable polymers to develop properties and have pricing close to existing thermoplastics.  New generations of biodegradable polymers are achieving better properties and lower pricing; however, even with the recent pricing upsurge in traditional commodity and engineering polymers, outside of PLA, the price differential is still significant. Infrastructure must be further developed to collect, accept and process biodegradable polymers. Legislation would be the key driver for creating this infrastructure. Legislation is needed to permit biodegradable polymers to enter waste streams; defined standards for compostability; effective and accurate product labeling; and, more positive consumer response to the higher costs of biodegradable products.

Europe
Germany is thought to account for about half of European consumption of biodegradable polymers. The economic slowdown that began in 2001continues to work against market growth. Consumers are reluctant to pay a premium for products made from biodegradable polymers.

Japanese Market
This market is considerably smaller than North American or European markets. In the early 1990s, almost all Japanese demand for biodegradable polymers was met by imports; production began in mid-1990s. Agriculture and forestry applications are more important in Japan than in either North America or Europe. Mulching film is the most common application. There are many Japanese companies involved, but they have relatively small production volumes, some of which are pilot plant operations.

Updates Since Report Was Published
•ADM & Metabolix PHA plant, 100 mil lb/yr, Clinton, IA, mid-2008 completion
•P&G, developed PHA with Kaneka Chemical, 90 mil lb/yr plant reportedly being built but P&G is providing no information
•Highly unlikely both will be built
•Biodegradable history is one of new capacity that is not built
•Novamont has invested 100 mil Euros to build 125 mil lb/yr of capacity at plant site in Terni, Italy, to produce “Mater-Bi,” biodegradable compostable thermoplastic polyester made from modified starch
•Mitsubishi is building plant to make succinic acid via bacterial fermentation of corn. Mulch films are one possible application.
•BASF introduced this year its first biodegradable polymer based on a renewable raw material. “Ecovio” contains 45% PLA blended with BASF’s Ecoflex. Initial applications aimed at shopping bags.
•In additives, several companies are considering incorporating PLA into more traditional thermoplastics. Sharp Corp. has developed compatibilizer technology for blending.
•DuPont has launched “Biomax Strong,” additive claimed to improve performance of PLA biodegradable packaging.
•Coalition of several recycling associations and two nonprofit recyclers have asked NatureWorks LLC to place a moratorium on expansion of PLA into bottles. They’re concerned that corn-based PLA will contaminate lucrative recycled PET stream

Summary
Biodegradable plastics markets have not developed or grown as quickly as initially thought. Legislation has and will drive establishment of needed infrastructure. Biodegradable polymers will remain a specialty niche market for at least ten years and possibly indefinitely. There are a sufficient number of companies willing to “hang in.” Healthy number of new companies appear to be willing to invest time and money to develop a profitable business.